Failure to appear by assessee in response to a notice issued electronically under Section 142(1) of the Income Tax Act An honest mistake: ITAT Mumbai

the Mumbai Bench of ITATcomposed of members GS Pannu (chairman) and Vikas Awasthy (judicial member), ruled that the assessee’s failure to comply with a notice issued electronically under section 142(1) of the Act of the 1961 income tax during the first year of transition to an online and digital interface by the IRS, is not intentional and constitutes an honest mistake.

The rated Triumph International Finance India Limited had appealed to the ITA against the order of the Commissioner of Income Tax (Appeals) (CIT(A)) which upheld the imposition of a penalty on the assessed under section 272A (1) (d) of the Income Tax Act 1961 for failure to comply with the notice issued under section 142(1) of the Act to during the relevant tax year.

The lawyer for the assessee Triumph International had argued before the ITA that the income tax department was gradually moving towards faceless electronic assessment and valuation and therefore stopped physically serving notices to assessees at the during the year 2019. The lawyer had contented himself that 2019 was the first year of online interface, the employees of the evaluated company were not aware that the opinions were issued electronically. The lawyer had claimed that it was only after the order imposing a penalty under Section 272A(1)(d) was served on the assessee that the assessee became aware of the proceedings. evaluation in progress. Counsel argued that the assessee immediately filed its response to the notice issued under section 142(1) of the Act and provided the required information and documents to the appraiser. The solicitor had argued that the failure to comply with the notice issued under section 142(1) of the Act was for reasons of good faith, and since the assessee Triumph International had participated in the proceedings of evaluation after becoming aware of the ongoing evaluation procedure, no penalty under section 272A(1)(d) of the Act should have been levied. The department’s representative argued before the ITAT that the appraise had deliberately failed to appear before the appraiser. It was found that the explanation provided by the assessee before the ITAT for his failure to appear before the appraising officer was an afterthought and that no such explanation was provided by the assessed in front of the assessment officer.

Section 142(1) of the Income Tax Act empowers the valuation officer to serve notice on the assessee for the purpose of investigation before undertaking an assessment under of the law. Section 272A(1)(d) of the Act provides that where a person fails to comply with a notice issued under section 142(1) of the Act, he shall pay a sum of ten thousand rupees as a fine.

The ITA observed that in this case the assessee Triumph International was able to demonstrate that it had reasonable cause for not responding to the original notice issued under Section 142(1 ) of the law. The ITAT also observed that it was not a case of absolute non-appearance of the appraised before the appraiser since subsequently, after having learned of the appraisal procedure in progress, the appraised had appeared before the appraiser and provided the required details.

The ITA ruled that in the present case, the assessee Triumph International had been able to show reasonable cause for failing to comply with the legal notice issued under section 142(1) of the Act. She observed that since 2019 was the first year of the switch to digital and electronic mode, the assessee’s error had appeared in good faith. The ITAT ruled that it was satisfied that the assessee’s failure to appear in response to the original notice under section 142(1) of the Act was not deliberate.

The ITAT therefore upheld the appraisee’s appeal and ordered the appraising officer to remove the sanction.

Case Title: Triumph International Finance India Limited v DCIT, Mumbai

Appellant’s Counsel: Akash Kumar

Counsel for the Respondent: Dr. P. Daniel

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